Can the Venezuelan oil industry survive another decade under Chavez?

November 22, 2010

A reader was kind enough to send me a report by Raymond James, a well respected regional broker in the US. Here is the conclusion, to a report entitled: “Muchos Problemas: Can the Venezuelan Oil Industry Survive Another Decade of Chavez?”:

“Venezuela’s 40% oil production decline since 2000 – nearly the world’s worst track record – is a story of politically motivated mismanagement on a grand scale. Chavez, in power since 1998, is poised to win re-election in 2012, and with term limits abolished, there is no end in sight to his virulently anti-business energy policy. We project a 2% production decline in 2011, with flattish production thereafter. PdVSA’s production targets of 5 MMbpd by 2015 and 6.5 MMbpd by 2020 are good for comic relief, but nothing else in our view. It would take a policy shift of drastic proportions to turn around PdVSA, and under Chavez that just ain’t happening. From a big picture standpoint, production declines in Venezuela put further downward pressure on OPEC’s already limited excess production capacity – a key element of our structurally bullish long-term stance on oil.”

I only disagree with “poised to win in 2012” we shall see…

Thanks to the anonymous reader.

26 Responses to “Can the Venezuelan oil industry survive another decade under Chavez?”

  1. GWEH Says:

    Mick, 70’s bodybuilding is no example… Arnold’s comeback title is the most controversial win ever for he stole the title from Mike Metzer because Joe Weider had it fixed. Arnold is product of a very nice time in our history and anabolic steroids that’s all.

  2. Kepler Says:

    My hypothesis: they saw it is starting to become counter productive (I will write later about it) and what they are doing is increasing the propaganda in another way:

    repeat “socialist” with anything that may be remotely positive in ads:

    “bienvenido a Barinas socialista”
    “producto socialista”
    “leche socialista”
    “precios socialistas” “PRECIOS SOCIALISTAS”
    They have changed the journalists, they have prettier faces. They use prettier girls in ads, posters as well.
    They know people are getting tired of Chavez’s face.

    AND: they will probably want to prohibit the faces of the smaller caudillos from our side once they have cleaned up the landscape of Chavez faces

  3. island canuck Says:

    Can some one please explain the real reason Chavez is removing his face from all the propaganda in the country?

    There has to be some kind of reason after we have been exposed to this for almost 11 years.

  4. jau Says:

    People what I am saying is that the pattern of energy production is already changing, plus to maintain production, I am not even talking about increasing it, Venezuela needs a bunch of money and a bunch of time. Therefore, my conclusion is that most of our oil will stay underground forever

  5. Roy Says:


    It is going to take more than electric cars to wean the industrialized world off of petroleum. Depending on exactly how you figure it, slightly less than half of the petroleum extracted is used to power automobiles. The remainder goes into aviation fuel (and we are nowhere close to having electric planes!), fuel for shipping (no electric cargo ships either), power plants, and feed stock for chemicals production.

    Given that China, as well as other heavily populated parts of the world are entering into user market for petroleum, it is a safe bet that (in spite of percentage reductions in parts of the already developed world) total world petroleum demand will continue to increase for the next 20-25 years.

    I don’t think that Chavez stays up at night worrying about electric cars.

  6. jau Says:

    Tan, have you seen the nissan leaf, the chevy volt, the investment in solar and wind power, heard of the oil spill in the gulf. The world changes faster than people think. Apart from that people around the world are tired of financing the unstable governments of oil producing countries, we are talking about Nigeria, Libia, Venezuela, and on and on.

    Because of people like Chavez the world is running away from oil. Its already happening.

  7. island canuck Says:

    tan said: “his regime would have double the funds to support it”

    And the power to borrow double what he already has further destroying the future of the country.

  8. tan Says:

    We’ll be using oil for many many years yet, so Venezuela is not ‘ missing the wave’ because of Chavez.
    Venezuela, thank goodness, will have far more oil available after Chavez moves on because of the incredible lack of efficiency of his regime. Were he running things properly, oil production would be double right now, his regime would have double the funds to support it, and there would be less oil, after his regime finally falls, available for the rebuilding of the country.

  9. jau Says:

    The stone age didnt end due of lack of stones

    The same will happen with the oil age

    Venezuela is missing the wave due to Chavez

    What a waste!

  10. Gringo Says:

    Back in 2004 the PDVSA prediction was that by 2009, production would increase to 5 million BOPD. Guess not.

  11. Kepler Says:

    Miguel, lo que decías sobre el británico ese:


    I have been reading a bit of press from Russia and what I read there is that the oil companies are dissapointed and some Russian critics are wondering about why they got into that in the first place (and answered themselves: mostly for political reasons, not economical…of course, for Russia it is not about ideology but geopolitics “an sich”)

  12. chiguire Says:

    Miguel- I forwarded this entry to a brother of mine who is retired oil and here’s his response:

    I predicted to yu’all when Chavez fired the PdVSA staff that oil production would plummet. I insisted that Chavez was lying about oil production levels after there was no material drop in production levels in the immediate years following their dismissal. Chavez was lying then and still is lying – the numbers Raymond Jones use are inflated.

    More importantly, Raymond Jones is full of it with their predictions. There is no way Venezuela can maintain a 2% production decline, much less “flattish production” in the future. Production in mature oil fields (which is what Venezuela has) do not decline gradually, even if you have experts managing them (which Venezuela does not). It would take lots of new discoveries to keep production at the levels anticipated by RJ. Look for accelerated decline, not gradual decline.

    The picture is much bleaker than is being painted.

  13. mick Says:

    I saw an interview Arnold Schwarzenegger gave a long time ago covering his days as a champion body builder. He said his secret to winning was to keep the competition focused on him and not on themselves.

    As long a Venezuela has no clear leader other than Hugo, he will continue to win. The Zealots will regurgitate his propaganda and the poor will continue to support him with their dying breathes.

    Personally I think Mendoza could defeat HIM. Especially if he keeps up with the new investments.

  14. island canuck Says:

    Many rumours flying on ND that GloboVision is facing either closure or expropriation tonight.

    Hopefully the rumours are false.

  15. Robert Says:

    Chavez in 2012? Just say no:

    Check out the cool photo in the link

  16. Juan Cristobal Says:

    Poised to win re-election? How can he say that with a straight face if Chavez just lost the Parliamentary election by a comfortable margin?

  17. loroferoz Says:

    “I don’t see it as a problem. If they can’t get it out of the ground they can’t steal it!.”

    More like it, they cannot steal it and then use it to bribe everyone!

    Maybe it’s all for the better if Hugo ruins Venezuelan oil and Venezuela by taking to extremes the practices and beliefs that make up the Petrostate. Maybe he will have to win in 2012.

  18. albionoldboy Says:

    “Chavez, in power since 1998, is poised to win re-election in 2012”

    Chavez will have the CNE declare him the winer of the 2012 election
    The big question is can he make it stand,?
    to ensure that it does Chavez is;

    (1) taking over as much of the economy as he can.
    (2) gaging whats left of the media as he can get away with.
    (3) putting the bejeebers up the middle class, that they may lose their
    homes, if they protest in the streets, the recent take overs were a warning.
    (4) threating and disqualifying his political opposition.

    Does this sound like a man letting a little thing like a presidential election stop him from keeping power?

  19. Kepler Says:

    I think I know where this law is heading.
    I have a strong déjà vu with the Soviet crap I had to read.
    Chavismo will from now on use the word “socialista” in every single service/product the regime offers…and as the regime is becoming almost the sole provider of a lot of things, you will see “socialismo” as you don’t believe possible…only no “socialist toilet paper” (even if that would be the best use for socialism).
    People I know who are in Venezuela or visited Venezuela recently and went to the end of the road tell me of a phenomenon you still don’t see as agressively in Caracas-Maracaibo-Valencia: more and more propaganda, but this time “socialista” and with beautiful girls (nothing vulgar, just beautiful faces) and the banana republic version of the posters Soviets used to put everywhere in the thirties and forties.

    We have to go against this with several plans.
    My take?
    Focus on pluralismo, no se dejen engañar, challenge to real debates.
    And for goodness sake, PJ has to elect a leader or two who start going to places in Venezuela. Can’t they pay a single key person to do that at least a third of his time?

  20. Robert Says:

    MO did you just violate the law by using Chavez likeness in your post without his permission? I’m am certainly curious about this new law.

  21. Roberto N Says:

    It is not just oil, but the other more valuable derived products that are suffering too.

    There is a fierce scarcity in poly-olefins produced locally. Pequiven claims it is because one hundred new plastics factories have opened, but the truth is ethylene production is less than half what it used to be, mainly thanks to no maintenance.

  22. Lollodev Says:

    I also disagree with “poised to win in 2012″ …but I just hope it is not “wishful thinking”.

  23. Dakar Says:

    Beyond the cause that the oil production increases or not, one is the fact that all the apparatus product goes in decay. That is the greater problem because if the oil products were replaced by another this would to make wealth, but is that no one and no anhoter options becomes.

    A greeting

    PS: They pardon my terrible English

  24. Antonio Says:

    What is “our structurally bullish long-term stance on oil”?

    The decline in Venezuelan oil production will probably have an effect on the extension of the deadline for migration to nuclear fusion as the main source of energy. But when that time comes, who is going to buy Venezuelan oil?

    Chavez is the ultimate conservationist.

  25. Roger Says:

    I don’t see it as a problem. If they can’t get it out of the ground they can’t steal it!

  26. jau Says:

    Freedom for Venezuelans will not survive 10 more years either

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